Public debt and the effects of government expenditure on private consumption - A Kalman filter analysis of the Swedish experience 1970-1997

Martin Johansson and Kristian Jönsson
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Martin Johansson: Department of Economics, Lund University, Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund, Sweden

No 2003:3, Working Papers from Lund University, Department of Economics

Abstract: Recently, it has been suggested that the effect of government expenditure on private consumption is dependent on the level of public debt. More specifically, a higher public debt implies a less Keynesian response in private consumption. In this paper we investigate if this theory is supported by Swedish data 1970-1997 by estimating a consumption function allowing for time-varying parameters. Our main finding is that the effect of government expenditure has become less Keynesian over time. This coincides with a large increase in public debt, lending support to the theoretical predictions.

Keywords: Government expenditure; private consumption; time-varying parameters (search for similar items in EconPapers)
JEL-codes: E12 E21 E62 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2003-04-03
New Economics Papers: this item is included in nep-eec, nep-his, nep-mac and nep-pub
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:lunewp:2003_003

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